DGAP-News: Commerzbank: Strong Market Position in a Challenging Environment

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DGAP-News: Commerzbank Aktiengesellschaft / Key word(s): Half Year Results
Commerzbank: Strong Market Position in a Challenging Environment
02.08.2016 / 07:00
The issuer is solely responsible for the content of this announcement.
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- Group Operating profit of EUR615 m for first half 2016 (first half of
2015: EUR1,089 m), and of EUR342 m for second quarter 2016 (Q2 2015:
EUR419 m)
- Loan loss provisions very low in first half at EUR335 m (first half of
2015: EUR438 m); NPL ratio for non-performing loans of 1.4% very good
- Operating expenses stable at EUR1,702 m in second quarter (Q2 2015:
EUR1,737 m)
- Net profit of EUR372 m for the first half (first half of 2015: EUR645
m), and of EUR209 m for second quarter (Q2 2015: EUR307 m)
- CET 1 capital ratio at 11.5% as of end of June 2016 (end of March 2016:
12.0%), leverage ratio of 4.4% - dividend accrual of 10 cents per share
in first half 2016
- Engels: "Commerzbank has maintained its solid market position and
posted an operating profit of 342 million euros in Q2. We sustain a
healthy risk profile with a very good NPL ratio of 1.4 per cent."
Commerzbank maintained its good market position in a challenging
environment, posting an Operating profit of EUR615 million for the first
half of 2016 (first half of 2015: EUR1,089 million). The figure for the
second quarter was EUR342 million (Q2 2015: EUR419 million). Revenues
before loan loss provisions stood at EUR4,545 million (first half of 2015:
EUR5,221 million). This fall in revenues was due in particular to the
negative interest rate environment and customer caution in the wake of
adverse developments on the macroeconomic and geopolitical front. The Bank
implemented targeted measures to counter the decline. Revenues generated in
the second quarter amounted to EUR2,231 million (Q2 2015: EUR2,436
million), of which EUR123 million is attributable to a positive one-off
effect from the Visa transaction. The level of loan loss provisions was
very low in the first half, at EUR335 million, of which EUR187 million was
booked in the second quarter (first half of 2015: EUR438 million; Q2 2015:
EUR280 million). The continued low level is due to the high quality of the
loan book and the stability of the German economy. At 1.4%, Commerzbank has
a very good non-performing loan ratio among its European peers. Operating
expenses excluding the European Bank Levy have remained stable for several
quarters. The Bank was able to compensate for strategic investments in
digitisation, regulatory enhancements, and compliance by means of ongoing
efficiency measures. Operating expenses amounted to EUR1,702 million in the
second quarter (Q2 2015: EUR1,737 million), with personnel expenses down
due to FTE reduction, sourcing, and lower accruals for variable
compensation. Net profit came in at EUR372 million for the first six months
of 2016, of which EUR209 million was generated in the second quarter (first
half of 2015: EUR645 million; Q2 2015: EUR307 million).
"Commerzbank has maintained its good market position in an adverse
environment and posted an operating profit of 342 million euros in Q2. In
the Private Customers segment we further grew and extended our loan
volumes. Furthermore, we are able to confirm our leading market position in
Mittelstandsbank. We sustain a healthy risk profile with a very good NPL
ratio of 1.4 per cent. Our CET1 capital ratio of 11.5 per cent is
appropriate and already includes a dividend accrual of 10 cents per share
for the first half of 2016. Moreover, we report a comfortable Leverage
Ratio of 4.4 per cent", said Stephan Engels, Chief Financial Officer of
Commerzbank.
CET 1 ratio at an appropriate level at 11.5% (Q2 2015: 10.5%)
The Common Equity Tier 1 ratio (CET 1) with full application of Basel 3 was
at 11.5% at the end of June 2016 (end of March 2016: 12.0%; end of June
2015: 10.5%). As in the first half of 2015, this includes a dividend
accrual of 10 cents per share for the first half of 2016. The change in the
ratio is due firstly to a moderate increase of risk-weighted assets (RWA)
with full application of Basel 3 to EUR198 billion as of end of June 2016
(end of March 2016: EUR195 billion); in particular for operational risks
due to the consideration of new external events factored in by external
databases. Secondly, deductions on pension liabilities as well as
revaluation reserve increased. The total assets in the Group amounted to
EUR533 billion as of the end of June 2016 (end of March 2016: EUR536
billion). The leverage ratio came in at 4.4% at the end of the second
quarter of 2016, reflecting the changes in capital and on the balance
sheet.
Development of the segments
In the Private Customers segment, a good Operating profit of EUR371 million
was recorded in the first half of 2016. This represented a year-on-year
increase of 13% (first half of 2015: EUR327 million). The figure for the
second quarter was EUR180 million (Q2 2015: EUR169 million). Revenues
before loan loss provisions remained steady at EUR1,869 million (first half
of 2015: EUR1,875 million). This includes a positive one-off effect of
EUR58 million from the sale of Visa Europe shares in the second quarter.
The segment was able to offset the negative interest rate environment with
targeted measures such as increasing the volume of its lending business.
Its loan volume was up by a significant 8% year-on-year in the first six
months of 2016. New mortgage financing business remained at a high level,
with margins increasing in the second quarter of 2016. Securities business
was down owing to geopolitical uncertainties and customers' resulting
caution. Overall, the Private Customers segment saw continued growth. A net
62,000 new customers chose Commerzbank in the second quarter. Since 2013
the Bank has now gained a net 940,000 new customers. Loan loss provisions
decreased in the first half to a very low EUR11 million (first half of
2015: EUR38 million). The segment was able to reduce its operating expenses
in the first half to EUR1,487 million (first half of 2015: EUR1,510
million).
Mittelstandsbank saw its Operating profit fall from EUR679 million to
EUR412 million year-on-year in the first half of 2016. In the second
quarter of 2016, it generated EUR203 million, compared with EUR314 million
in the second quarter of 2015. The impact of the negative interest rate
environment, in particular, was evident here, and Mittelstandsbank took
specific steps to offset this, for example by the reduction in deposits or
price measures. This is reflected in the positive trend seen in the loan-
to-deposit ratio from 80% in the first quarter of 2016 to 92% in the second
quarter of 2016. Revenues before loan loss provisions - excluding
adjustments for counterparty risk in derivatives business - totalled
EUR1,401 million in the first half of 2016 (first half of 2015: EUR1,521
million). Core business held stable: the Mittelstand Germany division
reported stable loan volumes along with higher margins. The Large
Corporates & International division benefited in the first half from a 7%
year-on-year increase in lending volume. The Financial Institutions
division generated lower revenues, as expected. This is mainly due to more
stringent risk and compliance requirements which were initiated by the Bank
itself. In addition, net interest income for the first half declined by 7%
year-on-year on account of the negative interest rate environment. Loan
loss provisions stood at EUR146 million for the first half (first half of
2015: EUR79 million). Operating expenses were increased slightly, coming in
at EUR835 million for the first half (first half of 2015: EUR805 million).
The Central & Eastern Europe segment achieved a good Operating profit of
EUR186 million in the first half of 2016, of which EUR109 million was
contributed in the second quarter (first half of 2015: EUR157 million; Q2
2015: EUR69 million). Revenues before loan loss provisions for the first
six months were 7% higher than for the same period of the previous year
(first half of 2016: EUR492 million; first half of 2015: EUR459 million).
The good revenue performance was supported by a positive one-off effect
from the sale of Visa Europe shares, totalling EUR65 million, in the second
quarter. The figure for the first half of 2015 includes a positive one-off
effect of EUR46 million from the sale of the insurance business to Axa
Group. Even excluding these two one-off effects, revenues increased year-
on-year. This gain resulted principally from net interest income which,
excluding exchange rate effects, was up 17% on the first half of 2015. The
segment continued to record organic growth. Similarly sales of consumer
loans showed a sharp increase of 24% in the first six months compared to
the first six months of 2015, reaching a record level in the second
quarter. M-Bank continued its positive trend in attracting new customers:
in the second quarter net new customers numbered around 109,000, taking M
Bank's customer base to 5.2 million at the end of June. Loan loss
provisions for the first half, at EUR42 million, were similar to the same
period of the previous year (first half of 2015: EUR47 million). Operating
expenses were higher in the first half of 2016, at EUR264 million (first
half of 2015: EUR255 million). The rise is due to the EUR33 million charge
for the Polish banking tax, introduced in February 2016.
In a challenging environment for equities business, the Corporates &
Markets segment saw its Operating profit reduced to EUR201 million in the
first half of 2016 (first half of 2015: EUR473 million). Of this, EUR119
million was for the second quarter, down from EUR176 million in the second
quarter of 2015. Revenues before loan loss provisions - excluding valuation
effects from own liabilities (OCS effect) and adjustments for counterparty
risks in derivatives business - came to EUR837 million in the first half,
which is 26% down on the same period of the previous year (first half of
2015: EUR1,133 million). In Advisory & Primary Markets (APM) the
performance of the Debt Capital Markets unit resulted in a stable year-on-
year showing. The Fixed Income & Currencies (FIC) division profited from
the continued demand for currency products, whereas demand for interest
rate and credit trading was muted by comparison due to the low interest
rate environment and the European Central Bank's monetary policy
activities. Equity Markets & Commodities (EMC) was hit by the high levels
of uncertainty on the capital markets, which took its toll on business in
structured investment products for institutional clients. The securities
lending and collateral management business is also being realigned and
adapted in response to the change in market conditions. Loan loss
provisions remained low in the first half. Net releases of loan loss
provisions came to EUR7 million for the first half (first half of 2015: net
release of EUR36 million). Operating expenses were reduced in the first
half of 2016 to EUR718 million (first half of 2015: EUR784 million).
The Asset & Capital Recovery (ACR) segment reported a 43% year-on-year
improvement in its Operating result in the first half to minus EUR256
million (first half of 2015: minus EUR451 million). Revenues before loan
loss provisions totalled minus EUR48 million in the first half of 2016,
above the level for the first six months of 2015 (first half of 2015: minus
EUR95 million). In the first half of 2016, loan loss provisions in ACR were
reduced to EUR145 million due to the continued portfolio run-down (first
half of 2015: EUR249 million), whereas Ship Finance loan loss provisions
were still at a high level. Operating expenses also decreased in the first
half of 2016, to EUR63 million (first half of 2015: EUR107 million).
Outlook
Commerzbank will continue its strategy of further expanding its market
share for its Private Customers business, and maintaining the leading
position of the Mittelstandsbank. The Bank expects the negative rate
environment and the adverse markets to further weigh on revenues.
Furthermore, the Bank will aim to keep its very good risk profile, although
loan loss provisions are likely to increase by a moderate amount due to
lower releases and continuously challenging shipping markets. Commerzbank
intends to keep its cost base stable with exception of additional external
burdens. The Bank's ambition remains to keep the capital ratio under full
application of Basel 3 above SREP-requirements.
Financial figures at a glance
in EUR m H1 2016 Q2 2016 Q1 2016 H1 2015 Q2 2015
Net interest and 2,618 1,274 1,344 3,482 1,496
trading income
Provisions for -335 -187 -148 -438 -280
loan losses
Net commission 1,602 781 821 1,770 855
income
Net investment 163 131 32 -67 61
income
Current income on 63 14 49 31 17
companies
accounted for at
equity
Other income 99 31 68 5 7
Revenues before 4,545 2,231 2,314 5,221 2,436
loan loss
provisions
Operating 3,595 1,702 1,893 3,694 1,737
expenses
Operating profit 615 342 273 1,089 419
or loss
Impairments of - - - - -
Goodwill
Restructuring 40 40 - 66 -
expenses
Pre-tax profit or 575 302 273 1,023 419
loss
Taxes 141 55 86 325 88
Consolidated 372 209 163 645 307
profit or loss
attributable to
Commerzbank
shareholders
Earnings per 0.30 0.17 0.13 0.55 0.23
share (EUR)
Cost/income ratio 79.1 76.3 81.8 70.8 71.3
in operating
business (%)
Operating RoTE 4.6 5.2 4.1 8.6 6.4
(%)
Net RoTE (%) 2.9 3.3 2.5 5.2 4.8
Net RoE (%) 2.6 2.9 2.3 4.7 4.3
CET 1 ratio B3, 11.5 11.5 12.0 10.5 10.5
fully phased-in
(%)
Leverage Ratio, 4.4 4.4 4.5 4.0 4.0
B3 fully phased-
in (%)
Total assets (EUR 533 533 536 565 565
bn)
*****
Press contact
Alexander Cordes +49 69 136-42764
Kathrin Wetzel +49 69 136-44011
*****
About Commerzbank
Commerzbank is a leading international commercial bank with branches and
offices in more than 50 countries. The core markets of Commerzbank are
Germany and Poland. With the business areas Private Customers,
Mittelstandsbank, Corporates & Markets and Central & Eastern Europe, its
private customers and corporate clients, as well as institutional
investors, profit from a comprehensive portfolio of banking and capital
market services. Commerzbank finances more than 30 per cent of Germany's
foreign trade and is the unchallenged leader in financing for SMEs. With
its subsidiaries Comdirect and Poland's M Bank it owns two of the world's
most innovative online banks. With approximately 1,050 branches Commerzbank
has one of the densest branch networks among German private banks. In
total, Commerzbank boasts more than 16 million private customers, as well
as 1 million business and corporate clients. The Bank, which was founded in
1870, is represented at all the world's major stock exchanges. In 2015, it
generated gross revenues of EUR9.8 billion with 51,300 employees.
*****
Disclaimer
This release contains forward-looking statements. Forward-looking
statements are statements that are not historical facts. In this release,
these statements concern inter alia the expected future business of
Commerzbank, efficiency gains and expected synergies, expected growth
prospects and other opportunities for an increase in value of Commerzbank
as well as expected future financial results, restructuring costs and other
financial developments and information. These forward-looking statements
are based on the management's current plans, expectations, estimates and
projections. They are subject to a number of assumptions and involve known
and unknown risks, uncertainties and other factors that may cause actual
results and developments to differ materially from any future results and
developments expressed or implied by such forward-looking statements. Such
factors include the conditions in the financial markets in Germany, in
Europe, in the USA and other regions from which Commerzbank derives a
substantial portion of its revenues and in which Commerzbank holds a
substantial portion of its assets, the development of asset prices and
market volatility, especially due to the ongoing European debt crisis,
potential defaults of borrowers or trading counterparties, the
implementation of its strategic initiatives to improve its business model,
particularly to reduce its ACR portfolio, the reliability of its risk
management policies, procedures and methods, risks arising as a result of
regulatory change and other risks. Forward-looking statements therefore
speak only as of the date they are made. Commerzbank has no obligation to
update or release any revisions to the forward-looking statements contained
in this release to reflect events or circumstances after the date of this
release.
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02.08.2016 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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Language: English
Company: Commerzbank Aktiengesellschaft
Kaiserstraße 16
60311 Frankfurt am Main
Germany
Phone: +49 (069) 136 20
Fax: -
E-mail: pressestelle@commerzbank.com
Internet: www.commerzbank.de
ISIN: DE000CBK1001
WKN: CBK100
Indices: DAX, CDAX, HDAX, PRIMEALL
Listed: Regulated Market in Berlin, Dusseldorf, Frankfurt (Prime
Standard), Hamburg, Hanover, Munich, Stuttgart; Regulated
Unofficial Market in Tradegate Exchange; London, SIX
End of News DGAP News Service
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488429 02.08.2016